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Dominion pulls plug on ACP, agrees to shed gas transmission, storage assets

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Focus on state regulated utilities, lower emissions

Washington — Dominion Energy is cancelling the 604-mile, 1.5 Bcf/d Atlantic Coast Pipeline project amid continued litigation hurdles, and it intends to sell substantially all of its gas transmission and storage assets to Berkshire Hathaway Energy as it sharpens its focus on state-regulated utilities, the company announced July 5.

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Despite having scored an important legal victory for the ACP project in the US Supreme Court in June, Dominion said "recent developments have created an unacceptable layer of uncertainty and anticipated delays" for the pipeline project. Among those, it pointed to a federal district court ruling in Montana that struck the US Army Corps of Engineers streamlined water crossing permit frequently used by pipelines, as well as action in the 9th US Circuit Court of Appeals that it said indicated "an appeal is not likely to be successful" in that case.

Since the project was launched in 2014, its estimated costs have swelled from $4.5 billion to $5 billion, to more recent guidance of $8 billion, Dominion noted.

The project, like the neighboring 303-mile, 2 Bcf/d Mountain Valley Project, was designed to ship Appalachian shale gas to Mid-Atlantic markets. Permitting affecting both projects has faced multiple, sometimes successful, legal challenges from a coalition of environmental groups.

SALE TO BERKSHIRE HATHAWAY

The announced asset sale to Berkshire Hathaway is valued at $9.7 billion, including the assumption of $5.7 billion in existing debt, Dominion said, noting it had executed a definitive agreement. The divestiture is expected to close in the fourth quarter of 2020.

The realigned company "combines premier state-regulated utility operations with comprehensive net-zero targets including one of the nation's largest zero carbon power generation investment programs," Dominion said in a statement.

Over the next 15 years, Dominion plans to invest up to $55 billion in emission reduction technologies. It also expects to retire more than 4 GW of coal- and oil-fired generation between 2018 and 2025, according to Thomas Farrell, Dominion's chairman, president and CEO.

"Today's announcement further reflects Dominion Energy's focus on its premier state-regulated, sustainability-focused utilities that operate in some of the most attractive regions in the country," he said. "Over the past several years the company has taken a series of steps — including mergers with Questar and SCANA, and the divestiture of Blue Racer Midstream and merchant generation assets — to increase materially the state-regulated nature of our profile, enhance the customer experience, strengthen our balance sheet, and improve transparency and predictability."

The project cancellation and divestiture come as fossil fuel infrastructure has come under increasing pressure from environmentalists concerned about climate change, and as some states, including Virginia, which ACP would serve, are increasingly setting ambitious carbon emission reduction goals.

WORSENING CLIMATE FOR PIPELINES

In the 4th US Circuit Court of Appeals, ACP endured setbacks related to permission to cross national forests, endangered species authorizations, and a state air permit for a compressor in Union Hill, Virginia. The overturning of the Army Corps' nationwide water crossing permit added another unknown.

Dominion said the prospects were too uncertain to justify investing more shareholder capital. It noted "a productive tree-felling season this winter is a key milestone to maintaining the project's cost and schedule."

The cancellation was welcomed by Southern Environmental Law Center, which has fought the project on multiple fronts.

"The Atlantic Coast Pipeline was wrong from the start. After years of opposition, legal defeats and threats to the environment, SELC is relieved to see Duke and Dominion make the right decision to walk away from it," said Greg Buppert, senior attorney at SELC.

Another of the project's long-time opponents chimed in. "Just one day after July 4th, America is stunningly closer to true energy independence with the cancellation of the Atlantic Coast Pipeline," said Mike Tidwell, executive director of the Chesapeake Climate Action Network in a press statement. "The fossil fuel era is rapidly drawing to a close in Virginia and nationwide thanks to the ferocious six-year opposition to this destructive pipeline."